Define the term “Working Capital.”

Working capital refers to the short-term financial health and operational efficiency of a business. It is calculated as Current Assets minus Current Liabilities. Current assets include cash, accounts receivable, and inventory, while current liabilities cover obligations like accounts payable and short-term debts. Positive working capital means a company can meet its short-term obligations and continue operations without liquidity issues. Negative working capital suggests potential financial strain or insolvency risks. Effective working capital management ensures the business maintains a balance between profitability and liquidity. It also supports daily operations, such as purchasing raw materials, paying wages, and managing inventory. Investors and lenders analyze working capital to assess a company's ability to fund short-term expenses and navigate operational challenges without resorting to additional financing or selling assets.